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Assessee represented by Shri Bhavin Talati, A.R. Department represented by Shri Vinod Kumar, Sr. DR Date of hearing 26/12/2022 Date of pronouncement 06/03/2023 Order under Section 254(1) of Income Tax Act PER: PAWAN SINGH, JUDICIAL MEMBER: 1. This appeal by the assessee is directed against the order of learned National Faceless Appeal Centre, Delhi (NFAC)/Commissioner of Income Tax (Appeals), (in short, the ld. CIT(A)) dated 07/06/2022 for the Assessment year (AY) 2014-15 wherein the assessee has raised following grounds of appeal: “1. That, the reassessment order passed by the ld. Assessing Officer and upheld by the ld. CIT(A) is against the facts of the case, bad in law, illegal and needs to be quashed.
2. On the facts of the case and in law, both the A.O. and ld. CIT(A) erred in appreciating the facts of the case, materials adduced and evidences supplied during the assessment proceedings and that their decisions are against the weight of evidence adduced. Therefore, the additions made in total income need to be deleted.
3. That, ld. A.O. added of Rs. 3,38,486/- u/s 56(2)(vii) of the Income Tax Act, 1961 by using mathematic formula in total income as against the Rohan Sanjay Patel Vs ITO documentary evidence adduced and ld. CIT(A) also affirmed the same additions. Both, the ld. A.O. and CIT(A) failed to appreciate the certified copy issued by Sub Reg. Office and the assessment orders accepting the document value in other joint owners’ case. Thus, additions made without considering documents and evidences adduced need to be deleted.
4. On the basis of facts of the case and in law, the addition made u/s 69 by the A.O. and confirmed by the CIT(A) for unexplained investment is bad in law and without any materials or evidences on records. The A.O. grossly failed to allow opportunity to the appellant for explaining investments made in property and CIT(A) also erred by not considering documents and evidences adduced during appellant hearing and confirmed the additions of Rs. 12,33,150/-. Thus, addition of Rs. 12,33,150/- needs to be deleted.
5. On the facts and circumstances of the case and in law, the reasons supplied for reopening the case by the A.O. did not include any reason for unexplained investments made in property nor any evidences or documents were supplied by the A.O. to form a belief that income has escaped, in spite of specific request made by the appellant. The A.O. arbitrarily made the additions and the CIT(A) also erred in concurring this additions. Therefore, the entire assessment is bad in law and against the provisions of Sec. 148 r.w.s.
147. Thus, the assessment order need to be quashed and additions made vide order need to be deleted.
6. That, the appellant reserves its right to add, alter, modify or delete any of the grounds of appeal
hereunto taken before.”
2. Brief facts of the case are that the assessee is an individual and filed his return of income for the A.Y. 2014-15 on 04/07/2014 declaring income of Rs. 66,500/-. Subsequently, the case of assessee was reopened under Section 147 of the Income Tax Act, 1961 (in short, the Act) on the information with the Assessing Officer that the assessee alongwith other co-owners purchased an immovable property out of Revenue Survey (RS) No.47, Block No. 86, Bamroli, Surat for a sale consideration of Rs. 3.05 crores vide sale deed dated 18/09/2013. The share of assessee in this property was 4.038%. As per assessing officer, Stamp Duty Authority determined the value of transaction of property at Rs.
Rohan Sanjay Patel Vs ITO 3.86 crores. Thus, there was a difference of Rs. 81,34,869/- between the fair market value determined by stamp duty authority and the value declared in the sale deed (conveyance deed), thus provisions of Section 56(2)(vii) of the Act, attract on such transaction. The share of assessee and difference amount is Rs. 3,28,486/- (4.03% of 81,34,869/-). In the return of income filed by assessee, the assessee has not declared the same and not offered for taxation. On the basis of such information and the aforesaid observation, the Assessing Officer recorded the reasons for reopening with prior approval of competent authority. Notice under Section 148 of the Act was issued to the assessee on 29/01/2018 through registered post. Notice was also served through e-mail provided by the assessee. The Assessing Officer recorded that no return of income in response to notice under Section 148 was filed by the assessee. The Assessing Officer recorded that on serving notice under Section 142(1), the assessee filed his reply dated 15/07/2018 and furnished copy of return filed on 13/07/2018 declaring same income as declared in the original return of income i.e. at Rs. 66,500/-. Copy of reasons recorded was provided to the assessee. The Assessing Officer noted that no details/documents were provided by assessee as required under various notices under Section 142 of the Act. A final show cause notice was issued to the assessee vide notice dated 26/09/2018, the assessee was asked to furnish his explanation on or before 27/09/2018.
Rohan Sanjay Patel Vs ITO The Assessing Officer further noted that no compliance of such notice was made. The Assessing Officer proceeded to complete the assessment on the basis of material available on record.
The Assessing Officer recorded that the assessee with other co-owners purchased a land in RS No.47, Block No. 86, Bamroli, vide registered sale deed dated 18/09/2013 for a consideration of Rs. 3.05 crores, wherein the share of assessee is 4.038% thus, the share of investment of assessee is Rs. 12,33,150/-. As per stamp duty valuation, the market value of property is Rs. 3.86 crores. Accordingly, the share of assessee in the investment as per market value of immovable property is Rs. 15,61,636/-, thus, there is difference of Rs. 3,28,846/- as per the value determined by the stamp duty authority vis-a-vis the consideration declared in the sale deed, which is treated as income from other sources as per the provisions of Section 56(2)(vii) of the Act. As recorded above, the Assessing Officer worked out the share of assessee at Rs. 12,33,150/- from total investment by all co-owners. Therefore, such investment of Rs. 12,33,150/-is also treated as unexplained investment and added to the income of assessee.
Aggrieved by the additions in the assessment order dated 29/09/2018 passed under Section 1248 r.w.s. 147 of the Act, the assessee filed appeal before the ld. CIT(A). Before the ld. CIT(A), the assessee filed his detailed written submissions on ITBA portal of the department. The Rohan Sanjay Patel Vs ITO submission filed by assesse is recoded in para-5 of the order of ld. CIT(A). The assessee submitted that in response to notice under Section 148, the assessee filed his return of income on 13/07/2018. The assessee also furnished copy of his return of income filed under Section 139 of the Act. In both the return of income, the assessee has disclosed purchase of two immovable properties alongwith other persons. Details of which were provided, the assessee provided details of agricultural land purchased in R.S. No. 44/2, Block No. 77, final plot No. 73A-73A, Bamroli, Surat and other land in R.S. No. 47, Block No. 86, final plot No. 82A-82B, Bamroli, Surat. First piece of land was purchased at Rs. 1.24 crores and second piece of land at Rs. 3.05 crores. In both the lands, the assessee was having share of 4.03%. The total cost of land with stamp duty and for registration fees was Rs. 18,20,896/-. During the assessment, the Assessing Officer vide show cause notice dated 7/09/2018 directed the assessee to submit details on or before 15/09/2018. In response to said show cause notice, the assessee asked for adjournment for one week. The adjournment request was rejected and hearing was fixed on 27/09/2018 vide notice dated 26/09/2018. Notice dated 26/09/2018 was sent through e-filing portal. The assessment was completed without giving opportunity and to furnish proper explanation. The Assessing Officer made two additions i.e. Rs. 3,28,486/- under Section 56(2)(vii) of the Act and Rs. 12,33,150/- as Rohan Sanjay Patel Vs ITO unexplained investment under Section 69 of the Act. While making addition of Rs. 3,38,486/-, the Assessing Officer noted that Jantri value of property was Rs. 3.86 crores against the value shown in the sale deed at Rs. 3.05 crores. No such details were provided, as to how the assessing officer arrived at valuation of property at Rs. 3.86 crores. The property was purchased at market value and stamp duty was paid as per appropriate Jantri rate. The assessee alongwith other co-owners purchased property as R.S. No. 47, Block No. 86 at Rs. 3.05 crores, the assessee was having share of 4.03%, and paid his share of Rs. 12,33,251/-. No additional stamp duty was demanded by Sub-Registrar Office and the document was accepted as it is.
The assessee further submitted that they made enquiry and sought clarification from Sub-registrar office concerned about the correct value of said property. Sub-registrar office issued calculation sheet for valuation of property i.e. agricultural land in Survey No. 47, Block No. 86 final plot No. 82A-82B, Bamroli, Surat dated 07/12/2016. In certified calculation sheet, the correct Jantri value worked out by Sub-Registrar office is at Rs. 2.98 crores. The document was registered by showing consideration at Rs. 3.05 crores. Certified copy of valuation sheet was also furnished. The assessee further submitted that rate of Jantri value is available on the State Government e-portal for general public information. As per official record of State Government portal, the jantri Rohan Sanjay Patel Vs ITO value of property is Rs. 4200/- per square meter. The total area of transaction for the impugned land in R.S. No. 47, Block No. 86 purchased by assessee and his co-owners is 7102 per square meter, so Jantri value is Rs. 2,98,24,800/-. The assessee also uploaded such working on the portal of CIT(A)/NFAC portal. The assessee submitted that the Assessing Officer has not given any opportunity to the assessee before making any addition. The assessee further stated that the investment made in the land is reflected in the balance sheet and the payments were made from bank account which is duly shown in the return of income. Copy of Profit and Loss account, balance sheet, capital account, copy of land purchase account and bank statement was furnished.
On the validity of reopening under Section 147/148 of the Act, the assessee submitted that though in the notice under Section 143(2), the Assessing Officer can make roving enquiry but in case of notice under Section 148, no roving enquiry can be made. Notice under Section 148 should be based on reasons to believe that income has escaped and that too on the basis of fresh material and documents. Reopening of assessment under Section 147 is potent power not to be exercised lightly casually or mechanically. The reasons so recorded should be based on some tangible material and that should be evident from reading the reasons. It cannot be supplemented subsequently either Rohan Sanjay Patel Vs ITO during the proceeding when objection to the reopening are considered or when during the assessment proceedings. The assessee categorically asked for providing reasons recorded and to supply relevant material on the basis of which the Assessing Officer claimed that income chargeable to tax has escaped assessment. The assessee also referred the reasons recorded by the Assessing Officer. By referring reasons recorded, the assessee explained that the Assessing Officer has not mentioned any word about any investment in purchase of land. Not a single document or material relating to unaccounted investment in agricultural land was shown. The Assessing Officer made roving enquiry which is not permissible by issuing notice under Section 148 of the Act. The assessee also relied on certain case laws.
The ld. CIT(A) in para 5 of his order, recorded that the submission of assessee was forwarded to Assessing Officer for his remand report. As no such submission was made by assessee before the Assessing Officer, by treating the same as additional evidence. The Assessing Officer submitted his report dated 11/10/2021 on NFAC portal. The Assessing Officer in his report, objected about admitting the submission of assessee on the ground that the assessee does not fulfil the condition prescribed under Rule 46A, therefore, such additional evidences may not be admitted. However, on merit of the addition, the Assessing Officer reported that the “assessee alongwith other 14 co-owners, sold Rohan Sanjay Patel Vs ITO immovable property situated at R.S. No. 47, Block No. 86, final plot No. 82A-82B, Bamroli, Surat”. The Assessing Officer further reported that on a consideration of Rs. 3.05 crores, the assessee and his co-owners paid stamp duty of Rs. 18,95,000/- and reiterated the contents of assessment order.
On the remand report, the assessee filed his rejoinder dated 20/12/2021. The contents of rejoinder are recorded in para 5.1 of the order of ld. CIT(A). The assessee reported that no additional stamp duty was paid. Stamp duty was actual payable at Rs. 14,96,391/- and actual duty was paid at Rs. 18,95,000/-, thus, they have paid excessive stamp duty. The assessee further explained that the documents were released immediately by stamp valuation authority/sub-registrar office. In case of under valuation, the documents are not released till the shortage of stamp is realised. The assessee submitted that it appear that the Assessing Officer tried to calculate the value of property by reverse method ignoring correct facts of the case. On the basis of such submission, the assessee prayed for deleting both the additions.
The ld. CIT(A) after considering the submissions of assessee noted that the assessee alongwith 14 other co-owners purchased immovable property (wrongly typed as sold) situated at Surat for a consideration of Rs. 3.05 crores and paid stamp duty of Rs. 18,95,000/-. The stamp duty charge is a legal document which is specified the nature of land and Rohan Sanjay Patel Vs ITO building at a particular timing. During the relevant period, stamp duty charges at 4.9% of total value of property and as per Jantri rate of property, the value of property comes to Rs. 3.86 crores, thus, there was a difference of Rs. 81,34,869/- between the fair market value and value on documents, which attracts the provisions of Section 56(2)(vii) of the Act. The assessee’s share in the property is 4.03% i.e. Rs. 12,33,150/-, the share of assessee in the investment as per stamp duty valuation comes to Rs. 15,61,636/-. Thus, there is a difference of Rs. 3,28,486/-. On such observation, the ld. CIT(A) dismissed the corresponding grounds raised
by assessee and confirmed addition.
10. On the other addition of Rs. 12,33,150/- under Section 69, the ld. CIT(A) held that during the assessment, the assessee has not made any compliance nor furnished any satisfactory explanation to the show cause notice despite proper opportunity, therefore, investment of Rs. 12,33,150/- was also treated as unexplained investment. Thus, the Assessing Officer was justified in making addition under Section 69 of the Act.
11. On the validity of reopening, the ld. CIT(A) held that the assessee made investment of Rs. 12,33,150/- for purchasing of property which is not declared in the return of income nor offered for taxation. Return of income in response to notice under Section 148 was not filed in time prescribed in the notice under Section 148 of the Act. The case was Rohan Sanjay Patel Vs ITO reopened after recording reasons after proper approval of competent authority. There was reason to believe that the income of assessee has escaped assessment, as there was failure on the part of assessee to disclose fully and truly all material facts of its income necessary for investment and upheld the validity of reopening. Further aggrieved by the order of ld. CIT(A), the assessee has filed the present appeal before this Tribunal.
I have heard the submissions of the learned Authorised Representative (ld. AR) of the assessee and the learned Senior Departmental Representative (ld. Sr. DR) for the Revenue and have gone through the orders of the lower authorities carefully. The grounds No. 1 and 2 of the assessee are general in nature and needs no specific adjudication, therefore, dismissed as such.
Ground No. 3 of the appeal relates to addition of Rs. 3,38,486/- under Section 56(2)(vii) of the Act. The ld. AR of the assessee submits that the Assessing Officer made this addition by taking a view that the Jantri value of property was at Rs. 3.86 crores against the valuation shown in the documents at Rs. 3.05 crores. No basis of such working or on arriving such figure is provided by the Assessing Officer. The assessee alongwith his co-owners, purchased a property at Rs. 3.05 crores, the area of the property was 7102 square meter, the jantri value of survey number was Rs. 4200/- per square meter, thus total value of the Rohan Sanjay Patel Vs ITO property was Rs. 2,98,24,800/-. The assessee was having share of 4.03%, thus, invested Rs. 12,33,251/-. The ld. AR of the assessee submits that the copy of sale deed is placed on record which clearly shown the value of consideration at Rs. 3.05 crores, which is more than the value of Jantri rates applicable on the particular survey number. As per Jantri rate, the value of property for collecting stamp duty is Rs. 2.98 crores. The stamp duty payable by assessee and co-owner were Rs. 14,96,391/-, however, the assessee and his co-owner has paid stamp duty of Rs. 18,95,000/-. The property was purchased as per market rate and applicable Jantri rate. No additional stamp duty was demanded by Sub-Registrar office and the document was accepted as it is and registered document was released immediately, no defect or under valuation of stamp duty was pointed out nor any demand for shortage of additional stamp duty was raised against the assessee. The ld. AR of the assessee submits that the Sub-Registrar, Surat-8, Rander issued certified working of valuation of property in question and as per certified working, the Jantri value of land in dispute is at Rs. 2.98 crores, however, the consideration on the document was shown at Rs. 3.05 crores. The ld. AR further submits that as per applicable Jantri rate of R.s. No. 47, of Bamroli, Surat is Rs. 4200 per square meter. The total area of the land under transaction was 7102 square meter, thus, the value as per the Jantri rate is Rs. 2.98 crores. The rate list of Jantri rate Rohan Sanjay Patel Vs ITO is filed at page No. 33 of the paper book. During the appellate stage, the ld. CIT(A) remanded the matter to the Assessing Officer. The Assessing Officer calculated the Jantri value of property by arithmetical formula ignoring the evidence produced by assessee. Both the lower authorities ignored the evidence and the certified copy of working of Sub-Registrar and passed the assessment order. There was no basis for making any addition of Rs. 3,28,486/- and the same is liable to be deleted.
Ground No. 4 relates to addition of unexplained investment of Rs. 12,33,150/-, the ld. AR of the assessee submits that the investment made in the land is duly reflected in the balance sheet and payment was made from ICICI bank account which was duly shown in the return of income. Copy of P&L account, balance sheet, capital account, land purchase account and bank statements were produced before the ld. CIT(A) in his submission. Source of land purchased were also explained by supporting evidence. The assessee has availed unsecured loan from his uncle Ashish R Patel and mother Smt. Darshna Sanjay Patel. Their confirmation, copy of their income tax return were furnished before the ld. CIT(A) and were available before the Assessing Officer at the time of remand report, they have not doubted such loan transactions. The Assessing Officer has not mentioned as to why investment of Rs. 12,33,150/- required to be verified or he possessed any material to Rohan Sanjay Patel Vs ITO form an opinion about the escapement of income. No documents or evidences in the power and possession of Assessing Officer was provided to the assessee. The invocation of application of provisions of Section 56(2)(vii) is void ab initio as the Assessing Officer wrongly calculated the value of transaction without verifying the transaction.
Ground No. 5 relates to the validity of reopening, the ld. AR of the assessee repeated the similar contention in his submission as submitted before the ld. CIT(A), which we have recorded above. To support his various submissions, the ld. AR of the assessee relied upon the following decisions: (i) Jindal Photo Films Ltd. Vs DCIT 105 Taxman 386 (Delhi) (ii) Nitin P Shah Vs DCIT (2005) 146 Taxman 536 (Guj) (iii) PCIT Vs Rajesh D. Nandu (HUF) (2019) 261 Taxman 110 (Bom) (iv) CIT Vs Kelvinator of India Ltd 320 ITR 561 (SC) Varshaben Sanatbhai patel Vs ITO (2016) 282 CTR 75 (Guj) (v) 16. In other alternative and without prejudice submission, the ld. AR of the assessee submits that the case of other co-owners who have also invested while purchasing the similar land was reopened by their Assessing Officer under Section 147, after recording similar reasons. However, after receiving reply from those co-owners, the similar transaction in their hands were accepted. Once, such transaction is accepted in the hands of co-owner, the assessee cannot be treated in differently by the department. The ld. AR of the assessee submits that he has placed on record the copy of assessment order passed under 14 Rohan Sanjay Patel Vs ITO section 143(3)/ 147 dated 04.12.2019 in case of Shri Jagdishkuamr Manilal Patel having PAN No. ABBPP1131H and in case of Shri Atulbhai Manilal Patel assessment order under section 143(3)/147 dated 03.12.2019 having PAN No. ABBPP1129P.
On the other hand, the ld. Sr. DR for the revenue supported the orders of lower authorities. The ld. Sr. DR for the revenue submits that no details were filed by the assessee before assessing officer despite granting full opportunity to the assessee. The assessee filed certain details before ld CIT(A) by way of additional submission, which was not examined by the assessing officer, therefore the issue raised in the present appeal may be restore to the file of assessing officer.
I have considered the rival submissions of the parties and have gone through the orders of the lower authorities carefully. I have also deliberated on various case laws relied by ld. AR for the assessee as well relied by the lower authorities. The assessing officer made addition of Rs. 3,38,486/- by taking view that he has information that assessee and his co-owners have purchased land in RS No.47, Block No. 86, Bamroli, vide registered sale deed dated 18/09/2013 for a consideration of Rs. 3.05 crores, wherein the share of assessee is 4.038% thus, the share of investment of assessee is Rs. 12,33,150/-. As per stamp duty valuation, the market value of property is Rs. 3.86 crores. On the basis of figure of Rs. 3.86 Crore, the assessing officer Rohan Sanjay Patel Vs ITO worked out the share of assessee in the investment at Rs. 15,61,636/-, and a difference of Rs. 3,28,846/- as per the value determined by the stamp duty authority vis-a-vis the consideration declared in the sale deed. The assessing officer made addition of such difference under section 56(2)(vii) by taking view that despite show cause no response or reply was furnished by the assessee. The Assessing Officer worked out the share of assessee at Rs. 12,33,150/- from total investment by all co-owners and treated it as unexplained investment and added to the income of assessee. No basis of such working or on arriving such figure is recorded in the assessment order nor copy of such working was provided to the assessee. The ld CIT(A) also confirmed the action of assessing officer on both the additions.
I find that before ld CIT(A) the assesse filed very exhaustive submissions, which is recorded above. I find that the assessee before ld CIT(A) specifically submitted that they made enquiry and sought clarification from Sub-registrar office concerned about the correct value of said property. Sub-registrar office issued calculation sheet for valuation of property i.e. agricultural land in Survey No. 47, Block No. 86 final plot No. 82A-82B, Bamroli, Surat dated 07/12/2016 and furnished certified calculation sheet, the correct Jantri value worked out by Sub-Registrar office is at Rs. 2.98 crores. The document was registered by showing consideration at Rs. 3.05 crores. Certified copy of Rohan Sanjay Patel Vs ITO valuation sheet was also furnished. I find that the assessee specifically submitted that rate of Jantri value is available on the State Government e-portal for general public information and the jantri value of property is Rs. 4200/- per square meter. The total area of transaction for the impugned land in R.S. No. 47, Block No. 86 purchased by assessee and his co-owners is 7102 per square meter, so Jantri value is Rs. 2,98,24,800/-. I find that no investigation of such fact was carried out by ld CIT(A) of his own. Rather, such submissions were remanded to the assessing officer, the assessing officer objected for considering such submissions. On merit of the additions, the assessing officer again retreated the similar contention as recorded in the assessment order.
I find the total area purchased by the assessee and his co-owners of 7102 Square meter, which is not in dispute. As per Jantri rate of the Revenue Survey No. 47, Block No. 87, final plot No. 82 B Bamroli is Rs. 4200/- per square meter so total value of land as per Jantri Value is Rs. 2,98,24,800/-. The assessee has shown consideration of such transaction at Rs. 3.05 Crore, which is much more than the value of Stamp Valuation authority. Thus, the assessing officer made addition of difference of Rs. 3,38,486/- without verifying the factual position. Thus, I direct the assessing officer to delete such addition made under section 56(2)(vii). In the result, ground No. 3 of the appeal is allowed.
Rohan Sanjay Patel Vs ITO 21. So far as other addition of unexplained investment of Rs. 12,33,150/-, is concerned, I find that the assessing officer made this in absence of any explanation by the assessee. Before ld CIT(A), the assessee submitted that the Assessing Officer has not given any opportunity to the assessee before making any addition. The assessee further stated that the investment made in the land is reflected in the balance sheet and the payments were made from bank account which is duly shown in the return of income. Copy of Profit and Loss account, balance sheet, capital account, copy of land purchase account and bank statement was furnished. The ld CIT(A) confirmed the addition without verifying the facts. Before me, the assessee made similar submissions as raised before ld CIT(A). On perusal of verification balance sheet of the assessee I find that land is reflected in his balance sheet and the payments were made from bank account which is duly shown in the return of income, copy of Profit and Loss account, balance sheet, capital account, copy of land purchase account and bank statement is already filed on record. Thus, I do not find any justification in confirming the addition by ld CIT(A). thus assessing officer is directed to delete the addition of unexplained investment of Rs. 12,33,150/-.
I also find merit in the other submissions of the ld AR for the assessee that the case of his co-owners were also reopened under section 147 by recording similar reasons about the investment and difference in Rohan Sanjay Patel Vs ITO consideration shown of the registered sale deed and the value allegedly determined by the stamp valuation authority. However, in cases of two of his co-owners, the charges were dropped and no addition either under section 56(2)(vii) or unexplained investment was made. Thus, the assessee also succeeded on this submission that he cannot be treated differently by revenue authority on similar set of facts.
Now adverting to the ground No. 5 of the appeal, which relates to validity of the reopening under section 147. Considering the facts that I have allowed relief to the assessee on merit, therefore, the adjudication on this ground of appeal
has become academic.
24. In the result, this ground of appeal is allowed. Order pronounced in the open court on 6th March, 2023.